In the March quarter HarvestRoad Ltd ("Company") successfully transitioned from a software development mode to commercialisation mode.
The Company continues to implement a stringent cost management programme however the results for this quarter fundamentally demonstrates improvement to the Company's revenue base.
Having an internationally recognised product released and generally available for sale in February generating sales almost immediately as a result - is a positive story for the Company this quarter.
SALES AND MARKETING ACTIVITY
In February 2003, the Company officially launched its flagship product HarvestRoad Learning Content Management System (LCMS) 2.0, also know as HarvestRoad "Hive", at the BlackBoard Users Group Conference in Baltimore, USA.
The Company's key reference accounts; Open Learning Australia, the Northern Territory Department of Education and the Australian Department of Defence have deployed the new release capability in the quarter.
HarvestRoad LCMS orders were received from Griffith University in Queensland, Erasmus University, Delft University, Waginengen Agricultural University in the Netherlands and the company expects to acquire six new higher education accounts across the United States, United Kingdom and Singapore in the fourth quarter. Almost all new sales are based on a software-leasing model and therefore create recurring annual income streams.
The Company is also undertaking significant business development activity in the Federal Schools Online Curriculum Management market with two foreign Ministries of Education an area in which the HarvestRoad LCMS excels. The year one value of these sales is estimated to total around $2 million with a whole of life value of at least $5 million. Sales into pilot projects expected in the next four months represent sales valued at approximately $300,000.
During the quarter the Company became a software development partner of IBM Inc to facilitate the integration of the HarvestRoad LCMS to IBM's newly launched Learning Management System. The Company and IBM are researching the Defence and corporate market potential with this joint capability.
The Company has also appointed new agents in Singapore and the United Kingdom to help expand its marketing services and has become a member of the WebCT Learning Innovations Network.
As part of the Company's recognised market leadership and ongoing initiatives it is in discussions to enter into an exclusive Master Distributor Agreement for a UK developed industry standards compliant, content authoring application. This tool will be integrated with the HarvestRoad LCMS to enable the creation of web based (HTML) content via Microsoft Word without the need for specialised authoring skills. The integration with HarvestRoad LCMS will enable content to be published directly into the HarvestRoad LCMS for storage; verification and version control and delivered to the client's chosen course management systems. Building on the Company's successful partnerships with leading course management systems, the integration with authoring solutions will provide its clients with a comprehensive solution for their content development, management and delivery needs, whilst further enhancing the Company's value proposition and market competitiveness. This has been well received by the Company's lead clients and it is expected the product will create a viable, new, recurring income stream for the Company.
FINANCIAL OVERVIEW
The Company is pleased to announce that Receipts for the month increased from $227,000 (Q2) to $419,000 (Q3) with Net Cash Operating Outflows continuing to decrease from $373,000 (Q2) to $50,000 (Q3). Total Operating and investing (R&D) outflows decreased from $752,000 (Q2) to $359,000 in the March quarter.
For the June quarter, the Company is targeting $750,000 in sales receipts of which $521,000 in sales commitments and receipts has already been received in April. Importantly, the Company is anticipating a breakeven cash flow for the June quarter, based upon the receipt of targeted sales receipts and operating expenses of $750,000 for the quarter.
Assuming authorisation is received for contracts entered into, or expected to be entered into in the next two months - and systems are subsequently installed the Company expects to receive an additional $1.1 million in receipts for the September 2003 and December 2003 quarters.
As set out in the Company's announcement to ASX on 15 April 2003 the Company has lodged a Prospectus for a non-renounceable rights issue to Eligible Shareholders of up to 10,650,000 New Shares on the basis of 1 New Share for every 5 Shares held at an issue price of eight cents ($0.08) per New Share to raise approximately $850,000 (before expenses).
Cash at Bank as at 31 March 2003 is $758,000. Combining the sales commitments and income receipts to date of $521,000 with the maximum capital raising funds of $850,000 (before expenses) will provide the Company with cash inflows of $1,321,000 in the June quarter, the Company is anticipating a Cash at Bank balance at 30 June 2003 of approximately $1.3 million (subject to the capital raising being fully subscribed).
SUMMARY
The Company has successfully transitioned from a software development mode to commercialisation of its HarvestRoad LCMS product with a global launch in Baltimore, Maryland and sales in Singapore, Australia, United Kingdom, Belgium, Holland, the United States and with more countries expected to follow.
The Company has established a technology leadership position in the Higher Education market and believes it is an outright prime mover in the Federal Schools Online Curriculum Management Market as evidenced by meeting the needs of Ministries of Education around the world.
The Company's association with IBM is very exciting and the Company expects major sales announcements this quarter.
Finally, the identification of a new software partner to integrate HarvestRoad LCMS with simple learning content authoring tool is an important technology and revenue initiative and will enhance the value of the HarvestRoad LCMS to the education market, and demonstrate the Company's ability to work with third party developers, as well as a maturing of the Company's business model.
On behalf of the Board I look forward to continuing to drive the business forward and to provide a long sought after return to shareholders.
G Barty EXECUTIVE CHAIRMAN
HRD Price at posting:
0.0¢ Sentiment: None Disclosure: Held
